NZGBS: Closed At Session Bests, Business Confidence Tomorrow

NZGBs concluded the session near their best levels, with benchmark yields declining 5-6bp. While weaker dwelling approvals likely contributed to the bid, the more likely factor behind the through-session strengthening seems to be a partial unwind of weakness earlier in the week triggered by fiscal deterioration concerns.

• Despite some cheapening in US tsys in the Asia-Pac trading, the local market’s resilience allowed the NZ-US 10-year yield differential to close unchanged at +80bp. The NZGB 10-year outperformed its ACGB counterpart by 2bp on the day, despite favourable AU inflation data.
• Swap rates are 6-8bp lower, with implied swap spreads little changed.
• RBNZ dated OIS pricing is flat to 4bp softer across meetings. Terminal OCR expectations sit at 5.61%, the lower bound of its recent range.
• Dwelling approvals fell 5.2% m/m in July versus a revised +3.4% in June. House approvals fell 18.8% m/m in July versus +8.8% in June.
• The RBNZ sold close to NZ$4 billion ($2.4 billion) in July to build its reserves of foreign currencies. (See link)
• Tomorrow the local calendar sees ANZ Business Confidence.
• Tomorrow the NZ Treasury plans to sell NZ$225mn of the 0.25% May-28 bond, NZ$175mn of the 1.50% May-31 bond and NZ$100mn of the 1.75% May-41 bond.